Ahead of I/O, Google Wallet Drops Plans to Introduce a Physical Card

Google will update its Wallet product at its I/O developer conference next week, but will not include the physical credit card that the company had considered launching at the event, according to sources.

Sources said the scuttling — for now — of an extended effort to roll out such a card was announced in a recent memo that also included the news that Google Wallet head Osama Bedier was leaving the company.

Those who have seen it said the Google card had a black face adorned with the whimsical rainbow “W” of the Google Wallet logo, a standard magnetic stripe and the usual raised numbers of a credit card embossed on it.

The card was part of Google’s larger strategic goal to know more about consumer purchases, given the immense potential value of that mostly offline-level data for its massive online advertising business.

Google is already sucking in that purchase data on many fronts — between Google Play payments, Google Checkout on the Web and also advertiser payments — in addition to the dedicated Google Wallet project.

But Wallet has been hampered by its focus on and use of NFC technology, which requires certain phones and special readers to make transactions. Google tried to make that easier by introducing a “cloud wallet” last year that accommodated existing credit and debit cards, but it could still go further toward mobile payments at the register without using NFC.

The dumping of the physical card plan was certainly abrupt, since it had actually been built into the new update of Google Wallet, said sources, and some partners had thought the search giant might be demoing it at the event.

But Google still plans to update its Wallet rewards, offers and loyalty points with the addition of a larger group of merchants, making it a fuller competitor to Apple’s Passbook. Within the Wallet, Google’s “proxy cards” help it get access to data by witnessing transaction flow to merchants.

However, these improvements won’t be integrated with another Google effort that’s similar, Google Now, which already includes support for mobile versions of United Airlines boarding passes and Fandango movie tickets in its Android mobile operating system version. Sources describe the Google Wallet and Google Now teams as “siloed,” which has presented some level of difficulty.

At Google, it was thought that a plastic card might be a way to attract a lot of consumers quickly with a payment method they are familiar with and that is convenient to them.

And the company seemed to have chosen a somewhat conservative approach. Sources said Google wasn’t planning to go so far as to become its own bank or try to disrupt existing interchanges — which would really shake things up in the credit industry — or to get data directly from Visa and MasterCard, which wouldn’t go over well with any number of players in the sector.

But sources also said that Google CEO Larry Page abruptly killed the card launch plan after he was displeased with a glitchy run-through demo last week. He had long been skeptical of a physical card solution, with several sources saying he felt it did not press forward innovation as payments startups like Square have done.

And as those plans fell apart, Bedier, VP of wallets and payments, was pushed out of the company. Google confirmed the departure yesterday; it followed the internal shift of former local and commerce bigwig Jeff Huber to its Google X unit.

Today, the Wallet program is within Google’s ads and commerce division, run by SVPs Susan Wojcicki and Sridhar Ramaswamy. Of the two, Ramaswamy is the exec directly in charge of Wallet.

Another recent addition to the Wallet team is Nik Sathe, who joined at the beginning of this year after being VP of architecture and infrastructure at eBay’s PayPal unit, leading the online payments giant’s technology strategy. Google never announced Sathe’s arrival at the company, and did not reply to a request on Wednesday to confirm it.

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